Credit insurance

To what extent are insurers upholding credit limits and what is the situation for new clients?

• All credit insurers have responded to the conflict with measures to limit the insured sum.
• These measures range from completely excluding all limits for clients in Ukraine and Russia to reducing limits to the actual need in each case or upholding smaller limits.
• What needs to be clarified is whether the mere existence of a limit means that the insurer cannot invoke exclusions which might already be assumed to exist based on publicly accessible information. Example: ‘shortage of foreign currency in the customer’s country’

Is insurance cover provided for events that lead to a costumer not paying which are related to the war in Ukraine? (=> The events themselves would then be the insured event.)

• Possibly, if the insurance policy includes what is known as ‘political cover’.
• In policies with political cover, is there a sufficiently strong causal relationship between the customer’s non-payment and the political risk situation?

Are events that lead to a customer not paying which are related to the war in Ukraine excluded from cover? (=> No insurance cover, even if another insured event occurs at the same time.)

• In policies that exclude political risks: does one of the listed exclusions apply?

• Is there a corresponding causal relationship between the non-payment and the occurrence of the excluded event? (The burden of proof lies with the insurer.)
• Is the situation permanent or might the reason for exclusion become invalid at a later time?

• Are there sanctions in force that legally bind the supplier?

• Business activities subject to such sanctions are not insured – regardless of whether the policy has a ‘sanctions clause’ or not. Business activities not permitted legally cannot be insured under the rules of the German Insurance Contract Act (VVG).
• Are your business activities, your customers or individuals operating there subject to sanctions? In this case no insurance cover whatsoever is provided

What action should you as an insured supplier take now if there is still a limit to be used?

• Please contact us to clarify the following questions, among others, for your individual situation:

• Should you accept new orders from customers in the affected regions or start new production orders?
• Should advance payment be agreed for new business? In this case we would try to get you a provision that would prevent advance payments received from being completely assigned to previous insured amounts owed. (There is a ruling by the German Federal Court of Justice (BGH) against a credit insurer, stating that the complete assignment of payments received to previous insured amounts owed was not legal. However, this ruling, like any ruling, refers only to the case presented to the Court at the time and may not be applicable in all instances to the relevant situations we have here.)

• Due to the number of different situations possible, binding statements on the existence of insurance cover can only be made for individual cases and usually not without the insurer’s involvement. With exclusions, for example, it is a question of determining the point at which the exclusion would apply: to what degree must an excluded event cause the customer’s non-payment in order for the exclusion to come into effect?